CFTC – Forex Academy

Introduction

In the previous lesson, we discussed market sentiment in Forex. Since you already know how the sentiment comes along, in this lesson, we will discuss how the forex market sentiment is measured.

What is the Commitment of Traders Report?

The commitment of traders (COT) report is how you measure forex market sentiment. One of the primary determinants of market sentiment in forex is the demand for a currency. The COT report tracks how commercial and non-commercial traders are positioned in the forex market.

As the name suggests, the COT report gives data about commitments made by big players in the forex market to conduct future trades. The report shows the totality of futures and options contacts in the forex market, which have not yet been settled. Thus, these future transactions can impact the price movement of the currency pairs in the spot market where most retail traders participate.

How does the Commitment of Traders Report work?

The COT report is published by the US Commodity Futures Trading Commission (CFTC). The publication is released every Friday at 3.30 PM ET. This report shows the total outstanding open positions in the forex futures market as of Tuesday of that week. The data in the COT report includes futures of the major currencies and most of the minor currencies.

According to the CFTC, the COT report is a breakdown of the futures and options market positioning of at least 20 traders. These are traders whose futures and options positions in the forex market are above or equal to the reporting levels set by the CFTC. In our subsequent lessons, we will further explain the type of traders included in the COT reports and the reporting levels.

It is worth noting that the majority of the transactions in the interbank forex market are private and are not made public. For this reason, the retail traders do not have a lot of knowledge about the significant transactions that occur daily in the forex market. Therefore, the COT reports play a significant role in publicizing the futures positioning in the forex market.

Conclusion

The forex market portion of the COT report shows the totality of the long and short futures position adopted by traders. These are speculative traders; whose primary objective is to anticipate future price changes and place their bets regarding a currency. Therefore, monitoring how these market players have positioned their future trades might increase your analysis of future trends in the forex market.

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Introduction

With a significant increase in the demand for retail traders to trade in the Forex market, tons of forex brokers have established their businesses to profit from their clients. This might seem like an advantage for traders as they have a variety of options to choose a broker. However, this is not the case.

In the world of forex brokers, there exist both genuine and fraudulent brokers. And these fraudulent brokers are referred to as bucket shops. These brokers have a frequent practice of misquoting and requoting and slippage, which favors only them.

Back in the day, as there was no internet, it was not possible for traders to know the actual price of the currency or security every moment. So, the clients used to place trades via phone. But, there were brokers who used to put the clients’ phone orders on slips and drop them into a bucket instead of officially executing them. Later, these orders were unofficially executed against the bucket shop operates, known as bucketeers.

These bucketeers usually did not disclose the real price of the currency, which was being traded in the market. They used to tell their clients that the price didn’t move in their favor, even if it actually did. But with the introduction of the internet and the improvement in the regulation of forex brokers, these scams have considerably reduced.

However, unfortunately, there still are these brokers out in the market. So, we’re here help to protect you from these scams. Things one must always keep a track of when trading with a broker are as follows:

✨ Constantly compare the price movement

Many traders trade based only on the prices mentioned by the brokers on their trading platform, which is quite dangerous. Currently, on the internet, there are many web portals that show the price feeds every tick. Hence, one must always keep track of the price feeds from several third-parties to confirm if the prices shown by the broker are real or not.

✨ Have a Trading Journal

Developing the habit of keeping a detailed journal of all the trades and transactions is extremely vital for a professional trader. Because if a trader feels that the broker has cheated them, they will need evidence to prove the genuineness in the filed case. And the simplest way to keep track of it is by taking a screenshot of every transaction they make. This can act as an excellent backup when they are cheated by a broker.

✨ Filing a legal action

Sometimes the disputes between the clients and brokers are not settled completely. So, this is when a trader must take legal action. If any conflict is unsettled, Forex traders can approach either the Commodity Futures Trading Commission (CFTC) or the National Futures Associations (NFA).

The CFTC has something called Reparation programs that provide an unbiased forum to handle and resolve customer’s complaints. You can click here to access the program.

Hence, by considering all these factors, one can stay away from being trapped by the fraudulent brokers in the industry.

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